Lease amendment

We have two sections in Reeves County, Texas with a gas well on one section. After receiving a couple offers for re-leasing, (current lease expires in Oct. 2011) we contacted an attorney and he said we could possibly get the current lease amended. We were wondering if anyone has had any experiences getting a lease amended so we could re-lease earlier than Oct.

Thanks for any info,



I have had a lease extended beyond the expiration date with the same company. In the extension, I recieved a much higher $/acre bonus and higher % royalty with a 2 year extension. Keep in mind, if the operator under the current lease had drilled a well prior to the expiration of the original lease, then the terms of that original lease would still be in effect. At least that was how it worked in my case but a well was not drilled.

Mr. Hagg,

Why would your attorney suggest to deal with the current Operator? You do have production with them, however if you extend one of your leases with them, there is no incentive for them to drill earlier. If you top lease with another, you have placed a BIG incentive with your current lessee to place the expiring acreage under production.

I think this could be a case where you can get good legal advice, but not so great business advice.

Are you looking for bonus dollars now or a well later? It seems as if your plan is to get bonus dollars now.

I am sorry as I guess I didn't make myself very clear on this subject.

The object of amending the lease would be to make the effective date of the Pugh clause (if we understand the Pugh clause correctly) occur sooner than Oct 2011. We have received preliminary offers with OTHER potential operators not the current operator. Although a bonus would be nice, we are presently dissatisfied with the current operator as nothing has been done to this well to increase production. This well has not been producing very well for several years.

Any thoughts would be appreciated.



Dear Mr. Hagg,

Are you sure that the Pugh clause has been triggered? The reason that I ask that is becuase of your statement in brackets above.

I think perhaps you need a landman or an attorney to give you his opinion on the state of the lease.

According to the attorney's letter I am looking at the Pugh clause will be triggered on Oct 2011, which is two years after the expiration date of the primary term. It shall then terminate as to all the leased premises except the 320 acres surrounding the gas well. However, the attorney then says that the State of Texas will permit an amendment of this section to reduce the term from 2 years after the primary term to immediately after the expiration of the primary term.

So now I go back to my question which was has anyone pursued amending a lease which would allow us to negotiate with a different operator.

Thanks again,